Keynesian economists ________.
A)observe that prices are perfectly flexible
B)believe that the classical dichotomy never holds
C)believe that only the interaction between savings and investment affects the real interest rate
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Keynesian economists focus on how in the short run, prices and wages can be sticky, and they emphasize the role of aggregate demand in determining the level of economic activity. They do not observe that prices are perfectly flexible (A is a characteristic more aligned with classical or neoclassical economics), nor do they believe that the classical dichotomy (the separation of real and nominal variables) never holds under any circumstances (B). While they do emphasize the importance of savings and investment, they do not believe that only their interaction affects the real interest rate (C), acknowledging other factors like monetary policy and expectations.

Keynesian Economists ________